Won Rises Alongside Yen on US-Japan Joint Action; Government to Hold Market Review Meeting on August 7

As explicit currency cooperation between the U.S. and Japan has contributed to the recovery of the value of the Korean won, the won-dollar exchange rate continues to show stability. Amidst this backdrop, the government plans to hold a vice-ministerial meeting on August 7 to review the financial and foreign exchange markets.

According to the Seoul foreign exchange market on August 5, the won-dollar exchange rate closed at 1,432.5 won (weekly settlement price) the previous day, falling by 7.6% (118.35 won) from the monthly high of 1,550.85 won reached over the past month. At the end of June, the exchange rate soared close to 1,550 won, but it dropped below 1,500 won as of July 14 and has remained below 1,450 won since July 29.

The appreciation of the won has been driven largely by supply and demand factors. Ongoing current account surpluses, the conversion of 26.5 billion dollars following the issuance of SK hynix American Depositary Receipts (ADR), and stabilization of foreign investors’ net selling in the domestic stock market have all improved the domestic dollar supply environment. In addition, explicit U.S.-Japan foreign exchange market interventions have supported the decline of the won-dollar exchange rate. The market also speculates that the local foreign exchange authorities intervened on July 30 by selling dollars in line with Japan, aiming to buoy up the value of the won.

There is also speculation about the possibility of further intervention, as long as it minimizes the stimulus for unwinding yen carry trades. Overnight, U.S. Secretary of the Treasury Scott Bessent remarked that if the yen shows significant weakness, other Asian currencies could follow the trend, noting that "the Korean won also recently displayed heightened volatility." In explaining the joint U.S.-Japan intervention to support the yen, he pointed to the recent high volatility of the Korean won.

While the yen depreciated 2% against the dollar in May, the won saw an even larger fall of 4.6%, reflecting heightened volatility. In June, the won-dollar exchange rate surged to the mid-1,500 won range, marking a substantial 7.1% depreciation (compared to a 3.8% yen-dollar appreciation). Secretary Bessent stated, "We are in close contact with Tokyo," leaving open the possibility of further intervention. He added, "If it benefits the U.S. economy and taxpayers and helps stabilize the global economy, we will do whatever is necessary to support Japan." Following Secretary Bessent's comments, the won-dollar exchange rate appreciated slightly in overnight trading, falling to the 1,428-won range.

Meanwhile, on August 7, the government will hold a closed-door vice-ministerial-level integrated market review meeting to discuss trends in the exchange rate and the financial, foreign exchange, and real estate markets. Attendees are expected to include the first and second vice ministers of the Ministry of Economy and Finance, the deputy governor of the Bank of Korea, the vice chairman of the Financial Services Commission, the senior deputy governor of the Financial Supervisory Service, and the first vice minister of the Ministry of Land, Infrastructure and Transport. A government official stated, "Due to correlation effects stemming from the appreciation of the yen, the exchange rate is expected to remain at the current level or show a slight downward stabilization trend in the short term."

This content was produced with the assistance of AI translation services.